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Aetna reports slight 1Q profit increase
Managed-care company Aetna Inc. said Wednesday its first-quarter profit rose slightly due to membership gains and premium increases, even though the company saw higher-than-expected medical costs.
The Hartford, Conn.-based company became the fifth large health insurer to surpass Wall Street expectations for the quarter. But unlike bigger competitors UnitedHealth Group Inc. and WellPoint Inc., Aetna saw an increase in the percentage of premiums it spent on medical care in its commercial segment. It also bucked another trend and posted an increase in commercial membership.
"While Aetna continues to execute well, the company's (first-quarter) results are the weakest in the industry thus far," Wachovia analyst Matt Perry said in a research note.
Aetna said its profit rose 1 percent to $437.8 million, or 95 cents per share, compared with $431.6 million, or 85 cents per share, in the same quarter last year.
Revenue, which excludes investment losses, rose 11 percent to $8.6 billion.
Earnings per share increased 12 percent, as the company spent $277 million to repurchase more than 10 million shares in the quarter.
The company said operating earnings, which also exclude investment losses, were 96 cents per share. That topped Wall Street expectations.
Thomson Reuters said analysts, on average, expected earnings of 93 cents per share on $8.5 billion in revenue.
Medical costs rose 14 percent to $5.8 billion. Company officials attributed that to the impact of layoffs and membership increases due to the federal law commonly known as COBRA, which helps people who lose their jobs keep temporary health coverage from their employer.
A new federal subsidy that picks up 65 percent of the cost of COBRA coverage for people who lose their jobs began late in the quarter, but it's unclear whether that had an effect.
Aetna also saw its members use more medical services per person, but spokesman Fred Laberge said it was hard to determine whether that was tied to the recession.
Aetna's commercial medical benefit ratio, which is the percentage of premium revenue spent on medical care, rose to 81.7 percent from 79.8 percent.
Total medical membership rose 9 percent to more than 19 million people, led by gains in commercial business, which generally involves employer-sponsored health insurance. The insurer added large national accounts for Bank of America Corp. and Home Depot Inc. during the quarter.
"This is especially impressive in a weak economy where industry-wide employer-sponsored coverage is declining," Perry wrote.
Both Minnetonka, Minn.-based UnitedHealth and Indianapolis-based WellPoint reported commercial enrollment declines.
The insurer also said a previously announced increase in its pension expense partially offset first-quarter gains. Aetna said earlier this year it will record a pension expense of about 39 cents per share in 2009 due to the equity markets. The company didn't offer a quarterly breakdown of that expense.
Investment losses decreased to $4.8 million from $58.5 million in the first quarter last year.
Aetna also said Wednesday it remains confident in the guidance it issued earlier this year, when it said it expected 2009 operating earnings of $3.85 to $3.95 per share.
Analysts expect $3.85 per share.
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Economy shrinks at worse-than-expected pace
The economy shrank at a worse-than-expected 6.1 percent pace at the start of this year as sharp cutbacks by businesses and the biggest drop in U.S. exports in 40 years overwhelmed a rebound in consumer spending.
The Commerce Department's report, released Wednesday, dashed hopes that the recession's grip on the country loosened in the first quarter. Economists surveyed by Thomson Reuters expected a 5 percent annualized decline.
Instead, the economy ended up performing nearly as bad as it had in the final three months of last year when it logged the worst slide in a quarter-century, contracting at a 6.3 percent pace. Nervous consumers played a prominent role in that dismal showing as they ratcheted back spending in the face of rising unemployment, falling home values and shrinking nest eggs.
In the January-March quarter consumers came back to life, boosting their spending after two straight quarters of reductions. The 2.2 percent growth rate was the strongest in two years.
Still, the consumer rebound was swamped by heavy spending cuts in virtually every other area.
Businesses cut spending on home building, commercial construction, equipment and software, and inventories of goods. Sales of U.S. goods to foreign buyers plunged as they retrenched in the face of economic troubles in their own countries. Even the government trimmed spending. It was the first time that happened since the end of 2005.
The sharp cuts underscore the toll the housing, credit and financial crises — the worst since the 1930s — are having on the country. The recession, which began in December 2007, has taken a big bite out of national economic activity and snatched 5.1 million jobs.
To cushion the impact of the downturn, the Federal Reserve has slashed a key bank lending rate to a record low near zero and rolled out a string of radical programs to spur lending. The Fed at the end of its two-day meeting Wednesday is expected to keep its key rate near zero and probably hold it there well into next year.
President Barack Obama is counting on his $787 billion stimulus of tax cuts and increased government spending on big public works projects to help bolster economic activity later this year. The administration also has put forward programs to rescue banks and curb home foreclosures — big negative forces weighing on the economy.
Even in the face of Wednesday's weaker-than-expected report, some analysts stuck to predictions that the economy would shrink less in the current April-June period — at a pace of 1 to 2.5 percent — as Obama's stimulus begins to take hold. Those analysts also continue to hope the economy would start to grow again in the final quarter of this year.
"The recession was bad in the first quarter but won't be as bad going forward," said John Silvia, chief economist at Wachovia. "I don't think this lessens the expected pattern that the economy will be entering a recovery by the end of this year."
However, the recent outbreak of the swine flu, which started out in Mexico and has spread to the United States and elsewhere, poses a new potential danger. If the flu stifles trade and forces consumers to cut back further, those negative forces would worsen the recession.
Before the flu outbreak, Fed Chairman Ben Bernanke said the recession could end this year if the government succeeds in stabilizing the shaky financial system and getting banks to lend again.
In recent weeks, Bernanke and his colleagues had cited "tentative signs" of the recession easing in some consumer spending, home building and other reports. Finance officials from the U.S. and other top economic powers meeting here last week also saw some hopeful signs for the global economy.
Fresh glimmers of hope emerged in the U.S. Tuesday. The Conference Board's Consumer Confidence Index rose far more than expected in April, jumping more than 12 points to 39.2, the highest level since November. And a housing index showed that home prices dropped sharply in February, but for the first time in 25 months the decline was not a record.
However, in the first quarter there was much weakness in those areas and others.
Spending on home building fell at a 38 percent annualized rate, the most since the second quarter of 1980. Businesses cut spending on equipment and software at a 33.8 percent pace, the most since the first quarter of 1958. Inventory reductions shaved 2.79 percentage points off overall first-quarter economic activity.
U.S. exports plunged at a rate of 30 percent, the biggest drop since the first quarter of 1969, reflecting the crimped appetite of struggling foreign buyers. The government also cut spending 3.9 percent, the most since the end of 1995.
Even if the recession were to end this year, the economy will remain feeble and unemployment will keep climbing, government officials and analysts say.
The jobless rate is now at a quarter-century high of 8.5 percent and is expected to hit 10 percent by the end of this year. It will probably rise a bit higher in early 2010 before starting to slowly drift downward. Still, the Fed predicts unemployment will stay elevated into 2011, and economists don't think it will return to normal — around a 5 percent jobless rate — until 2013.
More layoffs were announced this week. General Motors Corp. laid out a massive restructuring plan that includes cutting 21,000 U.S. factory jobs by next year. Clear Channel Communications Inc., the largest owner of U.S. radio stations, said it's cutting 590 jobs in its second round of mass layoffs this year amid pressure from the recession and evaporating advertising budgets. And bearings and specialty steels maker Timken Co. indicated it will cut about 4,000 more jobs by the end of this year after earlier suggesting about 3,000 jobs already had been targeted.
Elsewhere, construction equipment maker Bobcat Co. told nearly 250 workers at its two North Dakota plants they will be laid off indefinitely, executive search firm Heidrick & Struggles International Inc. announced plans to cut more jobs and reduce bonuses and salaries, and Lockheed Martin Corp. said it's cutting 225 jobs at a plant in upstate New York.
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Wall Street set to fall as swine flu jitters weigh
Wall Street looked set for a drop of more than 1 percent at the open on Monday as investors worried that a possible global flu outbreak could throw a wrench into the economy's ability to climb out of a recession.
Governments around the world moved to contain the spread of a possible swine flu outbreak, as a virus that has killed over 100 people in Mexico spread to the United States and Canada and may have reached as far as New Zealand.
"Right now it's putting a dent in the market and will continue to serve as a fear factor," said Andre Bakhos, president of Princeton Financial Group in Princeton, New Jersey.
"Until some visibility arrives on where this is going and a greater study of the implications, it will weigh on the market."
In the auto industry, General Motors Corp (GM.N) unveiled new restructuring plans, including the elimination of the Pontiac brand to focus on four core brands.
GM, trying to secure the government funding it needs to stay in business, was expected to announce a fresh round of cost cutting on Monday.
In earnings reports Monday morning, Verizon Communications Inc (VZ.N), the No. 2 U.S. phone company, reported higher-than-expected quarterly profit after a 12 percent revenue increase, helped by its purchase of a smaller rival and growth in cell-phone customers. Verizon's shares added 1 percent to $31.30 in premarket trading.
S&P 500 futures fell 17.10 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures lost 146 points, and Nasdaq 100 futures slid 21.75 points.
Jitters over what a government stress test of 19 major financial institutions might reveal could add to volatility. The Obama administration is due to release the results on May 4 but some of the details are expected to start trickling out before that.
Shares of Wells Fargo & Co (WFC.N) fell 4.7 percent to $20.39 after influential analyst Richard Bove downgraded the bank to "hold" from "buy."
As GM pushed ahead with its restructuring plans, rival Chrysler LLC (CBS.UL) showed signs of progress with its unionized workers with just days left to complete deals to slash labor and debt costs or face bankruptcy.
Elsewhere on the earnings front, cell-phone chip supplier Qualcomm Inc (QCOM.O) swung to a loss, hurt by investment losses and costs related to its legal settlement with Broadcom Corp (BRCM.O). Qualcomm's shares rose 3.4 percent to $42.75.
Stocks rallied Friday as earnings showed companies have weathered the recession, and economic data raised hopes the economic cycle may have hit a bottom.
On Sunday U.S. President Barack Obama's economic adviser, Lawrence Summers, said the sense of "unremitting freefall" in the U.S. economy has ended and the picture is now mixed.
The broad S&P 500 is up about 28 percent from March's bear market low in a rally spurred by growing optimism over the health of banks and signs the economic slowdown may be waning.
Data on tap includes a reading from the Dallas Fed's Texas manufacturing index for April at 10:30 a.m. EDT and the Chicago Fed's Midwest manufacturing index for March at 12:00 p.m. EDT.
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Graduating U.S. college seniors entering grim market
A college diploma has long been the ticket to a good job, but the deepest economic slump in decades has dampened the dreams of many U.S. college seniors.
They face a hard reality upon graduation this spring: stiff competition from the growing ranks of the unemployed, from those forced out of retirement or delaying it because of the collapsing stock market, and from graduates of past years who are still searching for jobs in their chosen field.
"You're graduating into this world and being thrown out of the college bubble and you're supposed to be able to get a job, which just doesn't exist," said Andrew Heber, 24, of Chicago, who graduated from New College in Florida in 2007.
The U.S. Census Bureau says 1.6 million college degrees will be awarded this year, a figure that has climbed steadily. Many depart school with expectations of making it on their own and with hopes of repaying student loans that average $22,500.
For seniors like Amanda Haimes at Clark University in Worcester, Massachusetts, the drumbeat of bad news about the weak job market is worrying, even scary.
"People are saying this is the worst year to graduate, ever," she said in a telephone interview.
Haimes, 22, plans to move back home with her parents in Atlanta and will make $3,000 this summer as a political party canvasser. "After that, I'm not 100 percent positive" of her future, the sociology major said.
LOSING COVERAGE
Many seniors like Haimes face the added worry of losing health insurance coverage for the first time in their lives. Some 20 U.S. states have passed laws mandating that adult children can get coverage under their parents' health insurance plans until they reach their mid-20s, but usually must remain unmarried dependents.
Some see few options other than living at home.
Confronted by a prolonged recession and a rising 8.5 percent unemployment rate, the highest U.S. rate in a quarter-century, some college seniors have grown "so anxious and worried they are paralyzed" and are not looking for a job, said University of Wisconsin, Madison, career services director Leslie Kohlberg.
Kohlberg and other college counselors said there are jobs to be had, but stamina is needed for the search.
What needs to happen -- and will, according to college job counselors -- is for students to migrate from training in sectors that are losing jobs like finance to fields gaining jobs like health care, education, engineering, and computer technology.
Still, there is desperation in the air, based on anecdotal comments from counselors, students and recruiters.
Wall Street recruiter Kurt Kraeger said he had to take down an online advertisement for three internships when he was flooded by 200 resumes. Other employers tell him of overqualified graduates appealing for any job they can get.
Many seniors plan to go straight to graduate school to get a leg up while waiting for the recession to end, in some cases creating a glut of applicants, counselors and students said.
Heber, an artist who has been unable to get into crowded art schools, is scraping together monthly expenses of $800 in rent and his health insurance premium out of savings from a previous job and earnings from free-lance graphic design work and computer consulting. He cooks dinners for his parents to save on his food expenses.
"Most people I know my age still live at home because they can't even get it together to make enough money to pay rent," he said. "Each class piles up against the ones before it. I know so many people who are looking for jobs, and have been since they graduated. There's this sense of 'No hope.'"
His sister, Alana, 21, is set to graduate in May from Knox College in Illinois, and expects to live at home and go back to her old summer job in an ice cream shop -- far from her chosen field of library science.
A surging number of graduating seniors are vying for paid and unpaid internships and positions with nonprofit groups, and applying to the government-run Peace Corps, Teach for America and Americorps.
All the programs have more applicants than available spots, President Barack Obama said in a speech April 21 in which he signed legislation to quadruple to 250,000 the number of position in Americorps.
"They're going to be making subsistence wages, but they're doing something very gratifying until the job market improves," University of Wisconsin career counselor Randy Wallar said.
Graduates also satisfy a criteria many prospective employers insist on: don't remain idle.
David McDonough, a Clark University career counselor, reminds seniors to make sure every cover letter and resume is letter-perfect, and to network, network, network.
"What I have tended to see more recently is people who graduated in the 1980s who have gone through everything that they can and have turned to us for whatever advice we can give," McDonough said. "Some are in their 50s."
TOO MANY GRADUATES?
Rumblings that U.S. colleges and universities pump out too many graduates who are ill-equipped for the available jobs echoes sentiments expressed in Britain and China, he said.
Obama frequently urges access to college be expanded.
U.S. government data shows jobs secured by college graduates on average pay almost double, or $20,000 more a year more, than those held by high school graduates; and college graduates' jobless rate at 4.3 percent is about half the national rate.
At campus job fairs, some students come away disappointed at the few positions offered as employers have cut back recruiting budgets. But employers make an effort to have a presence so as to be in position to compete for workers once the economy recovers, Kohlberg said.
The huge American baby boom generation will be retiring in coming years -- if they can afford to -- and the generation emerging from college is only one-third the size so competition for their services promises to be fierce, she said.
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Boeing profit narrows as economy hits orders
Boeing Co (BA.N) said its quarterly profit narrowed due to order deferrals by cash-strapped airlines but its shares rose as the planemaker did not increase cuts in production rates.
While Boeing also lowered its 2009 earnings outlook to between $4.70 and $5.00 per share, that range was still above Wall Street's average expectation of $4.61 per share.
Excluding one-time items, Boeing's profit beat market expectations by a few pennies, but the steady production program commanded most market attention.
"The thing that shocked me was they didn't bring down any more production rates. I think this was an opportunity for them to do it," said Alex Hamilton, senior managing director at Jesup & Lamont Securities.
"The consensus is that they need to bring these down."
Shares of Boeing, a Dow component, rose 3 percent to $37.75in early trading.
Boeing warned this month that its first-quarter profit would be hurt by lower-than-expected aircraft prices.
Prices are set about a year before delivery, determined by various economic barometers, which recently have signaled a poor performance for the world economy.
The company said on April 13 that production of its 777 minijumbo would fall to five per month from seven. But some analysts also expect production cuts to the 737.
Chicago-based Boeing and rival Airbus (EAD.PA) are being hit hard as carriers and cargo operators grapple with economic recession in many parts of the world.
Top U.S. carriers like AMR Corp (AMR.N), UAL Corp (UAUA.O) and Continental Airlines (CAL.N) all reported first-quarter losses.
So far in 2009, Boeing has seen more cancellations than orders for jets. In the first quarter, the company booked 28 orders, but removed 32.
"The expanded global economic downturn is presenting unprecedented challenges in our commercial airplane markets," Boeing Chief Executive Jim McNerney said in a statement.
"Performance across the overwhelming majority of our programs remains solid, and we are making progress toward our milestones on the 787 and other important programs," he said.
BEATS EXPECTATIONS
The world's No. 2 planemaker said its first-quarter profit was $610 million, or 86 cents per share, compared with $1.21 billion, or $1.62 per share, a year earlier.
The results include the previously announced 38 cent-per- share reduction from revised twin-aisle commercial airplane production rates and lower price escalation forecasts.
The profit also was hurt by "a less favorable delivery mix in defense and higher expense for research and development," Boeing said.
Excluding items, the company earned 87 cents per share, compared with a Wall Street consensus forecast for 91 cents per share, according to Reuters Estimates.
Total revenue rose 3 percent to $16.5 billion. Revenue from its commercial airplane division rose 5 percent to $8.55 billion. Revenue from its integrated defense systems unit rose 2 percent to $7.72 billion. And revenue from Boeing Capital rose 12 percent to $163 million.
The company made 121 commercial airplane deliveries in the quarter, compared with 115 a year ago. Boeing said its total company backlog at the end of the first quarter was $339 billion, down 4 percent in the year-ago quarter.
Boeing lowered its 2009 earnings outlook to between $4.70 and $5.00 per share due to the lower price forecasts. But Wall Street has a consensus forecast for a 2009 profit of $4.61 per share, according to Reuters Estimates.
The company said its delayed 787 Dreamliner is on track for its first flight in the second quarter.
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Morgan Stanley loses $578M in 1st quarter
Morgan Stanley posted a bigger-than-expected quarterly loss to common shareholders of $578 million, hurt partly by the deteriorating commercial real estate market.
The bank was also hit, counterintuitively, by an improvement in the value of its own debt in the first quarter. This improvement essentially increased the amount of debt on Morgan Stanley's books.
The Wall Street firm also slashed its quarterly dividend 81 percent to 5 cents per share from 27 cents.
The New York-based company's report comes after several big bank rivals have reported better-than-expected results in the last week, boosted in many cases by strength in their investment banking businesses.
Morgan Stanley posted a loss of 57 cents per share for the January to March period, after paying more than $400 million in dividends to preferred shareholders. The company said it lost $1.6 billion in December.
Shares fell 69 cents, or 2.8 percent, to $23.96 in morning trading.
Morgan Stanley reported December separately because this year the company shifted to a traditional calendar quarter. Its fourth quarter for the previous fiscal year included September, October and November.
Morgan Stanley's first-quarter shortfall was sharper than analysts expected. They predicted a loss of 8 cents per share.
It was also worse than last year's comparable first quarter. In that period, Morgan Stanley earned $1.3 billion, or $1.26 per share.
Morgan Stanley lost $1 billion in the latest quarter from its investments in real estate, and lost $1.5 billion because its own debt gained in value as investors grew more confident about the bank's creditworthiness compared with late last year, right after Lehman Brothers collapsed.
So if Morgan Stanley had to buy its debt back at the end of the first quarter, it would have had to pay more for it than it would have at the end of last year. And accounting rules require this change to be recorded as a loss.
This was the opposite of what happened to some other banks in the first quarter — Citigroup was able to record a $2.7 billion gain because investors grew more worried about its creditworthiness, and in turn, reduced the debt on Citigroup's books.
"Morgan Stanley would have been profitable this quarter if not for the dramatic improvement in our credit spreads — which is a significant positive development, but had a near-term negative impact on our revenues," said Chairman and CEO John Mack.
He added that the bank saw strong results in investment banking, commodities, interest rates and credit products.
Other banks — Citigroup Inc., JPMorgan Chase & Co., Wells Fargo & Co., and Goldman Sachs Group Inc. — have been posting first-quarter results that have topped analysts' estimates. These results were somewhat reassuring to investors, but they remain concerned about upcoming loan losses this year as unemployment rises and the housing market weakens.
"Morgan Stanley's first quarter earnings show that the current environment is still very challenging," said David Easthope, a senior analyst with consultancy Celent. "In this climate, expect Morgan Stanley to focus on continued reduction in the cost base and on maintaining its capital base as much as possible."
Chief Financial Officer Colm Kelleher said in an interview Wednesday with The Associated Press that the company "remains cautious," though he stressed Morgan Stanley has more than enough capital and cash on hand.
"I think this year is going to be a challenging year for people, but this firm has its balance sheet, liquidity and capital into a place where we are uniquely positioned to take advantage of markets where we see the right risk, justification and terms," he said.
The bank would like to repay back $10 billion in U.S. government loans, pending the results of the stress tests being administered to banks by the administration and permission from regulators, Kelleher added.
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GM, Chrysler to get $5.5B more in government loans
General Motors Corp. could get as much as $5 billion more in federal loans, while Chrysler LLC could get $500 million as they race against government-imposed deadlines to restructure, according to a government report filed Tuesday.
The quarterly report by a special inspector general on the auto industry and bank bailout programs says the money will be made available for working capital. GM has until June 1 to complete restructuring plans that satisfy the government's auto task force, while Chrysler has until April 30.
A person briefed on the plans said Tuesday that the exact amount of the loans have not been finalized and will be worked out with the companies. The person asked not to be identified because the negotiations are confidential.
GM already has received $13.4 billion in government loans, while Chrysler has received $4 billion.
The government's auto task force rejected both companies' restructuring plans on March 30 and gave Chrysler until the end of April to make further cuts and take on a partner or face liquidation. If GM doesn't meet its deadline, it will be forced to restructure under bankruptcy protection.
GM CEO Fritz Henderson said last week that the automaker would need $4.6 billion during the second quarter. A Chrysler spokeswoman said only that the company has not received any more money beyond the initial $4 billion.
The inspector general's report filed Tuesday says that as of March 31, the Treasury Department had spent $24.8 billion for the Auto Industry Financing Program, out of a projected initial total of $25 billion. The money includes aid to Chrysler and GM, plus their financial arms, Chrysler Financial and GMAC Financial Services.
The Treasury also has estimated that it will spend up to $1.25 billion to guarantee warranties for people who buy Chrysler or GM vehicles during the restructuring period. The program is designed to reassure consumers that their warranties will be honored, according to the report, which was prepared for Congress.
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Oil prices suffer sharp losses
Oil prices fell sharply on Monday on the back of the strengthening dollar, weak stock markets and sluggish US energy demand, analysts said.
New York's main futures contract, light sweet crude for May delivery, dropped 2.13 dollars to 48.20 dollars a barrel in morning trade.
Brent North Sea crude for June delivery shed 1.83 dollars to 51.52.
"Crude oil... has suffered declines today, amid a background of dollar strength and equity indices' weakness," said Sucden Financial Research analyst Brenda Sullivan.
The rising US currency makes dollar-priced crude more expensive for foreign buyers and therefore tends to dampen demand.
In the foreign exchange market, the euro sank Monday to a one-month low against the dollar as speculation mounted that the European Central Bank will cut interest rates next month to fight the recession, dealers said.
The European single currency tumbled as low as 1.2959 in morning trade. It later pulled back to 1.2968 dollars, from 1.3043 dollars late in New York on Friday.
Elsewhere, the oil minister of the United Arab Emirates said Monday that oil at 50 dollars a barrel would help bolster the global economy, according to the official WAM news agency.
"OPEC's latest decisions to cut production have led to the stabilisation of prices at the 50 dollar level, a price that provides needed support for the global economy and allows for investments," Mohammad al-Hamli was quoted as saying.
Hamli said the current price reflects the reality of the global recession, adding that "reasonable" oil prices are needed for the revival of the global economy. The United Arab Emirates is the world's ninth-largest oil producer.
In addition, the market was pulled lower after a recent large build-up in US crude stockpiles, which suggests demand remains weak in the world's biggest economy.
Monday's fall in prices is "probably a delayed reaction to the inventory data that came out last week, which was really, really bearish," said Tony Nunan, a risk manager at Mitsubishi Corp in Tokyo.
The US Department of Energy said last Wednesday that crude stocks surged 5.6 million barrels in the week ending April 10 to reach 366.7 million barrels -- the highest level since September 1990.
"Fundamentally we have a demand problem in the world, including the United States," said BMO Capital Markets analyst Bart Melek. "This overhang of supply is going to be with us for some time."
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Stocks point lower following six-week surge
Stocks pointed lower early Monday as investors remained cautious after Oracle Corp. said it plans to acquire Sun Microsystems Inc. for $7.4 billion.
The announcement of the deal comes at the start of a busy week of earnings reports and as investors look for signals about the direction of the economy after a six-week rally in stocks.
Bank of America Corp. said early Monday that it earned more than expected in the first quarter but that it also set aside $13.4 billion to cover losses on souring debt. The stock fell 5.6 percent in electronic trading.
Oracle said it would pay $9.50 a share for Sun. Oracle said it expects the deal will add $1.5 billion in earnings, excluding merger costs, in the first year.
Even with buyout and profit news, investors remained cautious. Investors are looking for signals that a rally from 12-year lows in early March can continue. Wall Street has been emboldened by early signals that the economy could be stabilizing. But after a 24 percent surge in the Dow Jones industrial average investors are asking whether the market has risen too quickly.
Dow futures fell 99, or 1.2 percent, at 7,985. Standard & Poor's 500 index futures fell 12.50, or 1.4 percent, at 854.30. Nasdaq 100 index futures fell 22.25, or 1.7 percent, to 1,329.75.
Bond prices mostly rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.89 percent from 2.95 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, was unchanged at 0.13 percent from Friday.
Investors will be looking to earnings reports for any information on the direction of the economy. Figures on home sales, manufacturing, retail sales and even unemployment in the past six weeks have signaled that the economy might not be worsening as quickly as it had been only months ago.
Early Monday, Halliburton Co. said its first-quarter earnings fell 35 percent as oil and natural gas producers cut back on exploration and drilling because of low prices.
A private sector group's monthly forecast of economic activity is expected to drop for the second straight month. The Conference Board's index of leading economic indicators, which is designed to forecast economic activity in the next three to six months based on 10 components, is expected to dip 0.2 percent, according to analysts surveyed by Thomson Reuters.
In other market moves, the dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude fell $2.56 to $47.77 a barrel in electronic trading on the New York Mercantile Exchange.
Overseas, Japan's Nikkei stock average rose 0.19 percent. In afternoon trading, Britain's FTSE 100 fell 1 percent, Germany's DAX index fell 2.3 percent, and France's CAC-40 fell 1.9 percent.
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Citigroup 1Q results top Wall Street forecasts
Citigroup's problems are far from over, but Friday it reported its smallest quarterly loss since 2007.
The bank posted a first-quarter loss to common shareholders of $966 million after massive loan losses and dividends to preferred stockholders. However, before paying those dividends, which were tied to the government's investment in Citigroup, the bank earned $1.6 billion.
Citigroup's results topped analyst forecasts. The company reported a loss per share of 18 cents, which was narrower than the 34 cents analysts predicted, according to Thomson Reuters. A year ago, Citigroup suffered a loss of more than $5 billion, or $1.03 a share.
Shares rose 12 percent in pre-market trading.
Separately, Citigroup said Friday it is delaying the government's exchange of billions of dollars worth of preferred shares into common shares until the government completes its "stress test." The government has been gauging the health of U.S. banks, and the results are expected in early May.
Citigroup's revenue doubled in the first quarter from a year ago to $24.8 billion thanks to strong trading activity in its investment bank. Its credit costs were high, though — at $10 billion — due to $7.3 billion in loan losses and a $2.7 billion increase in reserves for future loan losses.
Citigroup has been the weakest of the large U.S. banks, posting quarterly losses since the fourth quarter of 2007. But in March, CEO Vikram Pandit triggered a stock market rally after he said that January and February had been profitable for Citigroup.
It was one of the first signals that the banking industry might not be as sick as many believed. Earlier that month, fears that banks would need to be nationalized sent stocks plunging to 12-year lows.
Citigroup's better-than-expected report on Friday come after surprisingly solid earnings from JPMorgan Chase & Co., Goldman Sachs Group Inc., and Wells Fargo & Co. over the past several days. While recent results from these healthier banks have brought some relief to investors, many have been waiting to see how more troubled banks such as Citigroup have fared.
Pandit said in a statement Friday that he was "pleased" with Citigroup's performance.
"While we and the industry face challenges in the coming quarters as we work through the weak economy, we will remain focused on strengthening the Citi franchise," he said.
One concern among investors is that the strong trading activity seen by banks in the first quarter was a one-time event — the first quarter saw a surge in corporate bond issuance as the credit markets started thawing from their frozen fourth quarter. Even JPMorgan CEO Jamie Dimon acknowledged Thursday that trading activity is unlikely to remain so robust.
The question is whether banks like Citigroup can find other ways to offset loan losses, which nearly all economists and bankers agree will keep rising throughout the year as the unemployment rate ticks higher. The global recession is causing defaults in mortgages, credit cards and commercial real estate loans — and Citigroup is heavily exposed to all of these.
In early March, Citigroup stock hit an all-time low of 97 cents per share. It has since quadrupled, but remains down 40 percent for 2009. And at $4.01 a share Thursday, Citigroup stock was down 93 percent from its late 2006 peak.
Since late 2007, Citigroup has gotten a new CEO, a new chairman, and a new structure that splits its traditional retail and investment banking business from its consumer finance units, asset management, and risky mortgage-related assets. It's also been downsizing by selling off businesses and laying off a fifth of its employees. And it's gotten $45 billion in government funding and a federal backstop on roughly $300 billion in assets.
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Stocks fall as retail sales data disappoint
Wall Street fell early Tuesday after an unexpected drop in retail sales in March tested a notion that the economy is starting to find its footing.
The worries over the retail sales data also overshadowed better-than-expected profit reports from Johnson & Johnson and Goldman Sachs Group Inc.
Financial stocks showed some of the steepest losses even after Goldman's results came in well ahead of what analysts had been expecting. Other financial companies are due to report quarterly results this week.
Federal Reserve Chairman Ben Bernanke's assertion Tuesday there have been "tentative signs" of easing in the recession appeared to contain selling pressure after a five-week surge in the stock market.
In the early going, the focus was on the Commerce Department's report that retail sales fell 1.1 percent in March, the biggest drop in three months. Analysts polled by Thomson Reuters had expected an increase of 0.3 percent.
In the first half-hour of trading, the Dow Jones industrial average fell 93.82, or 1.2 percent, to 7,963.99.
Broader stock indicators also lost ground. The Standard & Poor's 500 index fell 10.75, or 1.3 percent, to 847.98, and the Nasdaq composite index fell 16.49, or 1 percent, to 1,636.82.
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Wall Street opens moderately lower
Wall Street fell Monday as investors awaited a flurry of corporate earnings reports and awaited economic readings that could provide insight into the direction of the economy.
Traders were uneasy about a New York Times report saying the Treasury has directed General Motors Corp. to lay the groundwork for a potential bankruptcy filing by June 1. GM might be forced to file for bankruptcy if it cannot complete a plan to exchange debt for equity and receiving concessions from the United Auto Workers, according to the report.
A White House official, speaking on condition of anonymity because no specifics of the GM plan have been announced, told The Associated Press that any speculation about a GM bankruptcy filing was "premature."
Jamie Cox, managing partner at Harris Financial Group, said the potential economic fallout from a GM bankruptcy filing will likely weigh on the market.
"Think of the economic fallout potential," Cox said. "It's inconceivable (GM) gets in to bankruptcy" and gets out quickly, he added.
Investors are also looking to a spate of earnings results throughout the week, including reports from key financial firms such as Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc. Financial companies had been among the hardest hit by the economic downturn and credit crisis, but they have also helped lead a rally over the past five weeks. Goldman's earnings report is due out Tuesday; JPMorgan's on Thursday; and Citigroup's on Friday.
In the first hour of trading, the Dow Jones industrial average fell 81.08, or 1 percent, to 8,002.30.
Broader stock indicators also slid. The Standard & Poor's 500 index fell 7.87, or 0.9 percent, to 848.69, and the Nasdaq composite index fell 9.64, or 0.6 percent, to 1,642.90.
On Thursday, a surprise announcement by Wells Fargo & Co. that it will report a record quarterly profit for the first quarter helped send the market sharply higher ahead of a long weekend. Markets were closed for Good Friday. The sharp gains made Monday's selling unsurprising.
Along with earnings reports, investors will receive key economic reports on inflation, housing and manufacturing throughout the week.
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Amy Gips loves her one-bedroom apartment in a swank Manhattan building that features a gym, golf simulator, yoga studio, and massage rooms. But she no longer feels she can justify paying $4,400 a month in rent, especially now that her ex-boyfriend has moved out.
A week ago, just as the 27-year-old associate at a private equity fund was planning her next move, a letter arrived from the property management company. The rent for the 750-square-foot Chelsea apartment with floor-to-ceiling windows overlooking Madison Square Park was reduced $900, or about 20%. It changed her calculus, though she hasn't given up on the idea of shopping around for something under $3,000 a month, with one or two months of free rent thrown in.
For years, rising rents in Manhattan were thought to be as inevitable as baseball at Yankee Stadium. But times change, and in New York, landlords are scrambling to hold on to renters who have been hit by the economic downturn.
That means renters who, like Gips, are still in good financial shape now have the whiphand. "I was thinking that the rent was so high that there was no way I'd consider staying," says Gips. "Now that they've offered the reduction on their own, I kind of feel I should do a bit of negotiation."
Avoiding Empty Apartments
During the six months since the financial crisis began in earnest, control of the Manhattan rental market has switched to the tenants, who no longer have to pay broker fees (traditionally about 15%) and who can get up to three free months of rent and even gym memberships thrown in just for signing on the dotted line. The power shift might not be as dramatic in other parts of the country, but rents are getting more affordable from Charlotte to San Francisco. And landlords everywhere are getting more creative (and desperate) to hold down vacancies and prevent turnover.
Landlords figure it's better to take a hit by offering a month or two of free rent and other freebies than to carry empty apartments that aren't generating income.
It's a nationwide phenomenon, according to Victor Calanog, research director at real estate data firm Reis (NasdaqGM:REIS - News). Half of apartment buildings reduced rents in the fourth quarter of last year and the first quarter of this year -- the highest percentage since Reis began tracking apartment data in 1980. (By comparison, only 17% of buildings reduced rents in 2007.) And average asking rents fell 0.6%, to $1,046, in the U.S. in the first quarter, compared with the previous quarter, the largest drop since Reis began collecting quarterly data in 1999. And average effective rents, which include free months and other landlord incentives, fell 1.1%, to $984.
Effective rents fell in 64 of 79 markets that Reis tracks. Effective rents in San Francisco dropped 2.8% in the first quarter of this year, compared with the previous quarter -- the nation's largest quarterly decline. Rents fell 2.6% in New York City (all five boroughs), 1.3% in Charlotte, 2.5% in San Jose, 0.9% in San Antonio, 0.9% in Cleveland, 1.2% in Chicago, and 2.3% on Long Island. Only a few markets, such as Houston and Dallas, showed increases, Calanog says.
Good Time for Good Deals
BusinessWeek teamed up with Reis to come up with the 25 most affordable large metro areas in terms of rents as a portion of local income. Oklahoma City, where people spent just 12% of their income on rent, was the most affordable. Other cheap markets included Indianapolis, Denver, Fort Worth, and Cleveland. The least affordable market was New York, where people spent 57% of their income on rent. But even New York is getting more affordable. About 75% of rental buildings reduced rents in the first quarter, Calanog says.
"Landlords are under increasing pressure as vacancies are moving up," says Calanog. "It's a great time to find deals, even if you're about to renew your lease. Just be prepared to follow through on any credible threats."
Paul Salamanca, chief executive of SkipBrokers.com, an online no-fee rental company for Manhattan apartments, says tenants are negotiating aggressively. "People are saying: 'If you don't help me out, I know another landlord that's willing to,'" Salamanca says.
But landlords around the country aren't reducing rents just because tenants are shopping around. Americans have seen their finances deteriorate amid the ongoing layoffs and pay cuts. Some landlords have dropped rents on a temporary basis to allow tenants time to find a new job.
For People Who Lose Their Jobs
About three weeks ago, Cleveland's Goldberg Cos., which owns 9,000 units in Ohio, North Carolina, Florida, and Texas, started offering "layoff-proof" leases, which guarantee tenants up to two months of free rent if they provide proof they were laid off. If the tenant is unable to find another job after the two months, they can break the lease with no penalty.
The company hopes to attract tenants who are living with parents or sharing apartments with multiple tenants.
"What's keeping people from renting is fear," says Eric Bell, a senior vice-president at Goldberg. "We wanted to give people a cushion or a safety net, so they know they'll have some time to get back on their feet."
Anger Among Other Tenants?
But not all landlords are giving renters financial incentives. Mary Gwyn, chief innovator for Apartment Dynamics, a property management training and consulting firm that also manages apartment communities in North Carolina, says she recommends against that strategy. She says allowing new tenants to live for free for a month or two damages profits and could create tension with existing tenants who aren't getting the same deal.
Landlords can prevent turnover by creating a better sense of community in the development, she says. They might cook Thanksgiving dinner for residents who don't have family nearby, send out cards to residents who are celebrating birthdays or who have suffered a death in the family, and organize pizza parties and useful workshops on resume writing and job searches, she explains.
"People want to live in a neighborhood where they feel that someone knows their name and cares about their circumstances," Gwyn says.
But Robert Scaglion, senior managing director of Rose Associates, one of New York City's largest development, property management, and marketing firms, says tenants in this job climate are sensitive to rental rates. He said the company, which manages Chelsea Landmark, where Gips lives, has increased its occupancy level to 98% by making swift changes to rents to reflect the market.
Where Renters Are Going
The pool of Manhattan renters has shrunk because people are doubling and tripling up, moving in with parents, or leaving the city for less-expensive digs or for new jobs elsewhere. Many parents who were subsidizing their twentysomething child's apartment can no longer afford to do so. At the same time, renters from Brooklyn, Queens, and northern New Jersey, who never thought they could afford Manhattan, are coming in to take advantage of newly reduced rents, Scaglion says.
"Normally, when the sales market starts to soften or go down, it's very good for the rental market," Scaglion said. "This time the for-sale and rental markets have gone down simultaneously."
The good news for landlords is that fewer people are moving out of apartments to buy condos or single-family homes, since those markets have also slowed in the Northeast.
Trading Up
Sofia Kim, vice-president for research at Steeteasy.com, a popular New York real estate listings site, says Manhattan rents are falling fast. Renewing tenants aren't asking just for reductions; they're asking to be moved to larger apartments for the same rents, she says.
Streeteasy says the median effective rent for one-bedroom apartments in Manhattan fell nearly 10% in the first quarter, compared with the same period last year. The rent for two-bedroom apartments dropped 15% in the Upper East Side and 28% in the hard-hit financial district, the company says.
Gips expects New York rents to drop more. But she doesn't want them to fall too far. "I hope next year there isn't another big (rent) reduction," Gips says. "That would mean the economy is in an awful place."
Click here to see the biggest cities with the most affordable rents.
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Investment Advice from Jack Bogle
Jack Bogle turns 80 this May. Last summer his body started to reject his 13-year-old transplanted heart, a turn of events that landed him in the hospital four times as the financial world was melting down. Bogle should be in bed. He has every reason to just sit back and reflect on his career as the father of indexing and as the conscience of the individual investor.
But with the stock market not far from a 12-year low -- and banks the world over taking ever-larger bailouts -- he'd rather spend these delicate days raising hell (much to his wife's consternation). He thinks mutual funds totally blew it by spending untold sums on supposedly deep-digging in-house research only to totally miss the leverage time bomb. This might be a tad more tolerable, he says, if they didn't pass those costs on to customers, who ended up losing even more.
Bogle is pressing Washington for explicit regulation concerning fiduciary responsibilities. Here is some of Bogle's advice for investors in these turbulent times.
The Stock Market
"If you can't afford to lose one more penny," says Bogle, "get out. But, if you're in your 20s to 40s, keep going. These are good values. The stock market has taken an awful lot of this mess into account, and it's hard for me to believe that common equities won't do better than Treasuries from this point on." Bogle thinks that a 7% nominal return -- more than twice Treasury bonds -- is realizable over the next decade.
Simple Math
Bogle's "relentless rules of humble arithmatic" show the importance of being vigilant about costs. A dollar invested over 50 years at 8% a year compounds to just under $47. But dock just 2% for expense ratios and transaction costs and you're down to $18. Back out another three percentage points for inflation and you're at $4.38 -- less than a tenth of your potential catch.
On Timing and Chasing the Sector du Jour
"The stock market's day-to-day is actually a distraction to the business of investing," according to Bogle. His point: The past century of data show that American businesses have grown at an annual rate of about 9.5%, with 4.5% from dividend yields and the remaining 5% from earnings growth. The simultaneous aggregate return on bonds averaged 5%. These are the realistic benchmarks to focus on. "It's all simplicity, mathematics, and common sense," he says. In other words, calibrate your expectations to these long-term figures, a discipline that requires you to ignore the pull of solar, B2B, nanotech, or whatever last year's hot sector was.
Sales Ethics and Practice
Caveat emptor for investors: Don't assume your retirement provider or money management firm espouses a standard of honesty, full and fair disclosure, or putting its clients' interests first. The industry is quietly bifurcated into salesmen and professionals. That is why Bogle is urging Washington to enact a federal standard of fiduciary duty to mandate prioritizing clients, avoiding conflicts, and disclosing all fees.
Overextended Treasuries
"Bond prices are already high. Stocks should do 3 or 4 percentage points better than bonds."
Act Your Age
The percentage of your portfolio in bonds should roughly match your age. For example, a 30-year-old investor would be 30% in fixed income -- a 75-year-old, 75%.
Where's the End?
This downturn could last 1 years to 2 years. But the stock market will recover months before a turnaround comes. Don't try to time your entry.
Plan More Wisely: Your Savings Are Likely Inadequate
At the end of 2008, the median 401(k) balance is estimated at just $15,000 per participant. Even if you project this balance for a middle-aged employee with growth over time via presumed higher salaries and investment returns, that figure might rise to some $300,000 at retirement age (if the assumptions are correct). But while that hypothetical accumulation may look substantial, it would be adequate to replace less than 30% of preretirement income -- a help, but hardly a panacea. (The target suggested by most analysts is around 70%, including Social Security.)
Contribute More
One reason for today's modest 401(k) accumulations is inadequate participant and corporate contributions made to the plans. Typically the combined contribution comes to less than 10% of compensation, while most experts consider 15% the appropriate target. Over a working lifetime of, say, 40 years, an average employee contributing 15% of salary, receiving periodic raises, and earning a real market return of 5% per year, would accumulate $630,000. An employee contributing 10% would accumulate just $420,000. If those assumptions are realized, this would represent a handsome accumulation, but substantial obstacles -- especially the flexibility given to participants to withdraw capital -- are likely to preclude their achievement.
Get Out of Your Own Way
There is excessive flexibility in 401(k) plans. Designed to fund retirement income, they are too often used for purposes that subtract directly from that goal. One such subtraction arises from the ability of employees to borrow from their plans, and nearly 20% of participants do exactly that. Even when and if these loans are repaid, investment returns (assuming they are positive over time) would be reduced during the time that the loans are outstanding, a dead-weight loss in the substantial savings that might otherwise have accumulated by retirement. Even worse is the dead-weight loss -- in this case, largely permanent -- engendered when participants "cash out" their 401(k) plans when they change jobs. The evidence suggests that 60% of all participants in defined-contribution plans -- i.e., a 401(k) -- who move from one job to another cash out at least a portion of their plan assets, using that money for purposes other than retirement savings. To understand the baleful effect of borrowings and cash-outs, just imagine in what shape our beleaguered Social Security system would find itself if the contributions of workers and their companies were reduced by borrowings and cash-outs flowing into current consumption rather than into future retirement pay. Bogle wants a new, streamlined, and unified retirement savings system to be stripped of so many confusing options. He says it should be replaced with a handful of conservatively calibrated choices that are clear in their risk profiles and the expectations they can satisfy.
Mandatory Allocation?
One reason that 401(k) investors have accumulated such disappointing balances stems from unfortunate decisions in the allocation of assets between stocks and bonds. While virtually all investment experts recommend a large allocation to stocks for young investors and an increasing bond allocation as participants draw closer to retirement, a large segment of 401(k) participants fails to heed that advice.
The Wrong Mix
Nearly 20% of 401(k) investors in their 20s own zero equities in their retirement plan, instead holding outsized allocations of money-market and stable-value funds -- options that are unlikely to keep pace with inflation as the years go by. On the other end of the spectrum, more than 30% of 401(k) investors in their 60s have more than 80% of their assets in equity funds. Such an aggressive allocation likely resulted in a decline of 30% or more in their 401(k) balances during the present bear market, imperiling their retirement funds precisely when members of this age group are preparing to draw on them.
The Under-20% Rule
Company stock is another source of unwise asset allocation decisions, as many investors fail to observe the time-honored principle of diversification. In plans that offer company stock as an investment option, the average participant invests more than 20% of his or her account balance in company stock, an unacceptable concentration of risk. If you feel you must, dabble in company stock with not more than a sliver of fun money. You're already overweighted in your exposure to the company's fate by way of employment and income.
The Old College Try
"Mutual funds can make no claim to superiority over the market averages," argued Bogle in his 1951 Princeton senior thesis, The Economic Role of the Investment Company. In other words, good luck beating the indexes. If anything, his prophecy was understated. Of the 355 equity funds in business in 1970, 223 have since gone bust. Of the 132 that survived, only 24 beat the Standard & Poor's 500-stock index and only seven did so by more than (a statistically significant) 1% per year.
It Runs in the Family
"Gentlemen, lower your costs!" urged Philander Banister Armstrong, Bogle's great-grandfather, in an 1868 speech to fellow insurance executives. In 1917, Armstrong published the book A License to Steal: Life Insurance, the Swindle of Swindles: How Our Laws Rob Our Own People of Billions. "He's my spiritual progenitor," says Bogle.
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Top College Business Programs by Specialty
If you're looking for the best undergraduate business program in the areas of marketing, or financial management, or even macroeconomics, head for the state of Virginia. But surprisingly, your final destination won't be Charlottesville, home of the top-ranked McIntire School of Commerce at the University of Virginia. Instead you will be traveling 75 miles southeast of UVA to the Robins School of Business at the University of Richmond. Robins is not only tops in the three areas mentioned, but also in corporate strategy and quantitative methods, making it the most celebrated program in BusinessWeek's annual ranking of the Best Undergraduate Business Programs by Specialty.
As part of BusinessWeek's Best Undergraduate Business Schools ranking, senior business majors were asked to grade their programs on a scale of 1 to 5 in 12 academic areas including marketing, accounting, calculus, financial management, and corporate strategy. Based on those grades, scores were calculated for each of the 101 ranked schools in each area. In total, 49 schools appear in the top 10 in at least one category.
With Richmond's strong performance in the classroom, it's no surprise that the school moved up the overall ranking eight spots to No. 12. True, the price tag at Richmond is steep -- Virginia residents can expect to pay four times as much as they would at UVA. But for the price, business students say they get a small program focused on hands-on, real-world experiences, with engaging, accessible professors and a strong alumni base. Students laud the fact that up-to-the-minute news is incorporated into core business courses, with current market trends and announcements from the Federal Reserve directing daily discussions.
High Specialty Marks for Overall Top Three
The undergraduate business programs at the very top of our overall list, published on Feb. 26, also are well represented in the specialty ranking, with each of the top 15 schools appearing on at least one top 10 list. No. 1 UVA was highly ranked in corporate strategy, financial management, and quantitative methods. Second-ranked Mendoza College of Business at Notre Dame takes home four top 10s, including calculus and business law. And No. 3 Wharton appears in five top 10s, including a No. 3 ranking in ethics.
Boston College's Carroll School of Management -- ranked 17th overall -- fared especially well, with eight top 10 specialty rankings including the top spot in accounting. This recognition comes at a good time, as accouting is one of the few bright spots in this less-than-desirable hiring market. But the remaining top-ranked accounting programs might not be the ones you would expect. In fact, the average overall rank for the accounting top 10 is 30, with schools like No. 45 Baylor, No. 48 Binghamton, and No. 91 Cincinnati in the mix for top spots. At Baylor, students say they are treated like accounting professionals, and that finding a job in the field is a cinch, thanks to a career fair specifically for accounting students. One complaint, though, is that this intense focus on accounting comes at the expense of non-accounting majors.
Further down the list, the University of Nebraska also enjoyed success. Ranked for the first time this year, Nebraska finished near the bottom at 96th overall, but the school snared top 10 specialty rankings in three categories, inlcuding the top spot in business law. Nebraska is also ranked in the top 10 in macroeconomics, which shouldn't come as much of a surprise, considering Warren Buffett got his B.S. in economics from the school and once even taught an elective there. As part of another elective called "Investing the Buffett Way," students visit with the Oracle of Omaha at Berkshire Hathaway's (NYSE:BRK-A - News) headquarters.
Introducing Sustainability
New to the specialty ranking this year is the sustainability category, an area many schools are delving into after requests from students. Leading the pack is the University of Illinois, where administrators have not only introduced courses focused on green business, but have also incorporated sustainable energy into the design of the business school's new "green" building. "Our facilities are revolutionizing standards for universities nationwide," says one Illinois student.
Elsewhere, schools like Ohio State's Fisher School of Business -- ranked 11th in sustainability -- are bringing local issues into the classroom. At Fisher, students have been developing possible solutions for the recycling issues the city of Columbus is experiencing. Also, undergrads can apply for a study abroad program focused on green business that includes a weeklong trip to Costa Rica to observe companies that have implemented sustainability-focused business practices into their operations.
See the slide show and interactive table of BusinessWeek's Best Undergraduate Business Schools specialty rankings.
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Tax Advice for Rental Property Owners
My vacation rental business owns 23 properties on which we make over $200,000 in principal payments annually. Since we make $195,000 in annual profit, every year we end up in the hole financially. We take depreciation on the properties, but it doesn't offset our taxes by much. Is there a way to deduct the principal payments we're making on our properties? -- D.P., Cartersville, Ga.
No. "You cannot deduct principal payments on loans," says Bill Fleming, a tax partner at PricewaterhouseCoopers. "This is a typical issue with any leveraged investment -- especially real estate, since that is nearly always leveraged."
When business owners make principal payments to pay down debt, such as you are making on your real estate mortgages, your cash flow is impacted negatively. However, making those payments means you are building equity in your assets, so they are not expenses that reduce your profit and therefore cannot be used as tax deductions.
Consider Refinancing
A business such as yours is typically considered a long-term wealth generator, assuming you can keep the properties in good condition long enough to sell them for substantially more than you paid for them. (In today's real estate market, of course, this strategy may be much tougher to achieve than it was a few years ago.)
Since interest rates are extremely low currently, you might consider refinancing any of the properties that have gained significant equity since you purchased them, suggests Michael Hanley, a CPA based in Smithtown, N.Y. "At today's lower rates, you should be able to reduce monthly payments, or pay down mortgages on other properties that don't have enough equity to refinance but are encumbered with high-interest-rate mortgages," he says.
You could also check with your state's licensing board to see if you meet the tests to be considered a qualified real estate professional. That status might allow you to deduct more of your losses in a given year, Hanley says.
Look Into Shorter Depreciation Schedules
Another idea is to have a cost-segregation analysis done on your properties. This is a strategic tax tool used for commercial and rental property firms that can reduce your tax liability by shortening depreciation schedules on some of the assets installed in or associated with your properties, Hanley says. "Typically, on commercial and rental properties, mortgages are amortized over 15 or 20 years. However, the property is depreciated over a much longer time frame -- usually 27 or 39 years. This means that your principal payments may end up being double the amount of your depreciation deduction."
A cost-segregation analysis would identify components of your properties that would qualify for depreciation over more rapid time frames, such as 3, 5, 7, or 15 years. Doing that would enhance your cash flow by reducing your tax liability now and more effectively match your depreciation expenses to your mortgage payments, Hanley says.
Specialty accounting firms do cost-segregation analyses but the fees can be substantial, so explore the cost and the potential for tax savings with your own accountant first. In order to withstand a challenge from the Internal Revenue Service, you'll need to obtain a certified cost-segregation analysis report if you decide to have one done, Hanley says.
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Stocks set for higher open on insurers, homebuilders
Stock index futures pointed to a higher open on Wednesday after news of government aid for life insurers and a merger among homebuilders spurred optimism and offset a quarterly loss from Alcoa (AA.N).
Insurers surged in premarket trade on news the U.S. Treasury Department plans to extend the Trouble Asset Relief Program to certain life insurers, the Wall Street Journal reported, citing people familiar with the matter.
Shares of Hartford Financial (HIG.N) and Lincoln National (LNC.N) rose more than 23 percent.
Helping to further offset earnings news, Pulte Homes (PHM.N) said it would buy Texas-based builder Centex (CTX.N) for $1.3 billion in stock against the backdrop of a troubled industry.
"It is a positive that especially in a struggling industry like housing, prices have fallen to level where they see value," said Marc Pado, U.S. market strategist, Cantor Fitzgerald & Co. in San Francisco.
"Its good for the market and is something we expect to see across the board in many industries."
S&P 500 futures rose 3.30 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures rose 17
points, and Nasdaq 100 futures rose 11.25 points.
Alcoa kicked off earnings season with a first-quarter net loss that was worse than Wall Street estimated as metal prices and the auto industry slumped. Shares edged higher to $8.01 in premarket trade after initially falling 3.7 percent.
Shares of Centex jumped more than 30 percent to $10 while Pulte shed 3 percent to $10.45.
Still, weak earnings announcements from around the globe continued as Intel (INTC.O), the world's largest chipmaker, is unsure of when demand for semiconductors will revive, said Chairman Craig Barrett.
Shares of the chipmaker were flat after slipping 0.6 percent to $15.36.
Sharp Corp (6753.T), the world's No. 3 LCD TV maker, doubled its loss estimates for the year just ended on a slump in sales of its Tvs and panels, but unveiled plans for a cost-efficient new factory in an effort to cut costs.
German carmaker Daimler (DAIGn.DE) forecast a significant drop in revenue in all of its automotive business this year as it pushed back its of when the beleaguered industry might recover.
U.S. securities regulators meet on Wednesday to consider restrictions on short selling, a type of investing blamed by some lawmakers and executives for exacerbating the financial crisis and driving down share prices.
U.S. stocks slid on Tuesday, hammered by fears that companies will show they struggled in the first quarter as the recession dragged on as the earnings season kicked off with Alcoa.
With declines in the past two trading sessions, the S&P 500 has now trimmed its rise from the March 9 low to 20.6 percent.
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U.S. mortgage applications rose last week, as demand for home purchase loans jumped even as interest rates edged up from recent record lows, data from an industry group showed on Wednesday.
Demand for home purchase loans, an indicator of home sales, far outweighed demand for refinancing. The increase may help gauge what is in store for the hard-hit U.S. housing market this spring, the peak home buying season.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications , which includes both purchase and refinance loans, for the week ended April 3 increased 4.7 percent to 1,250.6.
Cameron Findlay, chief economist at LendingTree.com based in Charlotte, North Carolina, said home loan demand at his company has remained strong and steady over the last several weeks.
"In addition, the quality of the borrowers coming to us has remained high with high FICO scores and low loan-to-value ratios," he said on Tuesday. "This is an encouraging sign as responsible borrowers looking to purchase or refinance their homes are getting the help they need with low rate, high-quality loans."
FICO scores refer to borrowers' credit ratings.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.73 percent, up 0.12 percentage point from the a record low reached the previous week. The survey has been conducted weekly since 1990.
Interest rates were well below year-ago levels of 5.78 percent.
"As rates remain at historic lows, we anticipate this trend will continue as more borrowers take the time to shop around for competitive rates on home loans," he said.
The U.S. housing market is in the worst downturn since the Great Depression and its impact has rippled through the recession-hit economy, as well as the rest of the world.
Low mortgage rates have generated demand for home refinancing loans and should continue to do so, although when it comes to demand for loans to buy homes, the low rates had only a moderate impact until last week.
The MBA's seasonally adjusted purchase index rose 11.1 percent to 297.7.
The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was up 13.3 percent.
WEEKLY REFINANCING ACTIVITY RISES
Bob Walters, chief economist at Quicken Loans, an online mortgage lender in Livonia, Michigan, said home loan activity continued to improve as consumers took advantage of attractively low interest rates.
"While credit guidelines remain stringent, there are plenty of qualified folks who are putting more money back in their pockets by locking in a low rate," he said.
"Incentives like the first-time home buyer tax credit are helping to generate increased purchase activity," he said.
The Mortgage Bankers Association's seasonally adjusted index of refinancing applications increased 3.2 percent to 6,813.5.
The refinance share of applications decreased to 77.9 percent from 79.1 percent, while the adjustable-rate mortgage share of activity was unchanged at 1.5 percent.
Fixed 15-year mortgage rates averaged 4.49 percent, up from 4.45 percent the previous week. Rates on one-year ARMs increased to 6.23 percent from 6.20 percent.
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How to Make Your Kids Money-Savvy
Scrawled in big, pink letters across three envelopes are the words "spend," "save" and "give." It's how second-grader Chloe McLaughlin organizes her $8 allowance.
It may sound grown-up for someone who still writes in crayon. But given the state of the economy and runaway levels of personal debt, her parents figured it's never too soon to teach a little fiscal responsibility.
"We see a lot of people having trouble financially these days, and that made us think about instilling discipline in them early," says Kevin McLaughlin, a 33-year-old resident of Pine Beach, N.J., who also has two younger children.
Once a casual weekly payment, allowance for many families has evolved into a more structured lesson in money management. Children today might be expected to map out budgets or track spending in exchange for weekly payments as they get older.
For now, the McLaughlins are keeping it simple by letting 8-year-old Chloe decide how she wants to use her allowance. Her decision surprised them: $4 goes to savings, $3 to charity. Just $1 goes toward spending.
"Of course, it's only been a few weeks, so that could change," says McLaughlin, who works in marketing.
With a little bit of guidance, your own child's money savvy might surprise you. Here are some strategies to make an allowance count.
How Do I Start?
Give young children clear jars, envelopes or piggy banks so they can see their allowance accumulate. This makes the concept of saving tangible.
To provide some guidance, have them divide money into categories, as the McLaughlins did with Chloe. Depending on how sophisticated you want to be, set up two or three jars with labels such as "saving," "spending" or even "video games," if you want to focus on short-term purchases.
"Some parents are very willy nilly about it, but allowance needs to be structured," says Jennifer Hartman, a certified financial planner and principal with Greenleaf Financial Group in Los Angeles. "Don't just give it to them because the kids are whining about it."
If you want to preserve the piggy bank tradition, Money Savvy Pig offers see-through piggy banks divided into four compartments -- spend, save, donate, and invest. A pig is $16.99 at http://www.msgen.com.
If you haven't already, open a savings account for your kids so they can make occasional deposits for long-term goals.
How Much Should I Give?
The rule of thumb is $1 for every year of their life, meaning a 10-year-old would earn $10 a week. But that baseline might be too high or low depending on your expectations.
For instance, it might not be enough if you expect your kids to pay for their lunch or after-school snacks. Whatever the figure, it should be enough so they can make decisions about purchases but not so much that they don't need to weigh what they buy.
While you want to provide some structure, don't dictate how they spend every penny. The purpose of an allowance is to let your children experiment and even fail while it's still harmless.
Lastly, don't be swayed by whining for more money. "You have to show them that you can't always be keeping up with the Joneses," Hartman says.
Should I Tie It to Chores?
Tying allowance to routine chores can be an invitation for trouble. It might prompt an expectation of payment simply for making a bed or hanging up clothes. "That should be part of taking care of family," says Joel A. Larsen, certified financial planner with Navigator Financial Advisors in Davis, Calif.
Instead, Larsen suggests offering to pay for specific tasks that go above and beyond everyday duties. He pays his 8- and 12-year-old daughters $6 an hour to help with filing duties at the office. They can also wash windows or help out with yard work for extra cash. "As they get older, they'll learn that they need to work jobs to earn money," Larsen says.
Every family is different, of course. You might decide to give your child an allowance with no strings attached. Others might dock pay for failure to perform certain duties, whether it's helping out around the house or making grades at school.
How Should I Adjust as Kids Get Older?
Spending can quickly outpace an allowance as your child get older. The obvious way to bridge the gap is to encourage teenagers to get a part-time job.
For major purchases such as a car, consider working out a deal where you pick up a share of the cost. "They should save up for it one way or another," says Hartman of Greenleaf Financial. "Otherwise it could turn into a problem when they get a credit card and just buy whatever they want."
If you want them to focus on school work, consider giving a quarterly stipend for clothing and other expenses, she says. This can teach kids to be judicious with money over time.
At some point, you might have to consider prepaid debit cards to give teens flexibility to shop online or download songs. Discover Financial Service's Current and Visa's Buxx cards let parents set spending limits and specify where the cards can be used. You and your child can check the balance online. The Current card charges a $5 monthly or a $50 annual fee. Fees for the Visa Buxx card are determined by the issuer.
If you don't want to give your kids plastic, let them make online purchases with your credit card then repay you in cash.
What if My Budget Is Tight?
Don't feel guilty if you have to scale back your child's allowance. Having children share in any family cutbacks can be an important lesson, says Susan Beacham, founder of Money Savvy Generation, a Lake Bluff (Ill.) company that makes personal-finance products for children.
In fact, she says it will prepare them for the future by giving them a taste of what many adults are going through in the recession.
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GM and Segway unveil new two-wheeled urban vehicle
A solution to the world's urban transportation problems could lie in two wheels not four, according to executives for General Motors Corp. and Segway Inc.
The companies announced Tuesday that they are working together to develop a two-wheeled, two-seat electric vehicle designed to be a fast, safe, inexpensive and clean alternative to traditional cars and trucks for cities across the world.
The Personal Urban Mobility and Accessibility, or PUMA, project also would involve a vast communications network that would allow vehicles to interact with each other, regulate the flow of traffic and prevent crashes from happening.
"We're excited about doing more with less," said Jim Norrod, chief executive of Segway, the Bedford, N.H.-based maker of electric scooters. "Less emissions, less dependability on foreign oil and less space."
The 300-pound prototype runs on a lithium-ion battery and uses Segway's characteristic two-wheel balancing technology, along with dual electric motors. It's designed to reach speeds of up to 35 miles-per-hour and can run 35 miles on a single charge.
The companies did not release a projected cost for the vehicle, but said ideally its total operating cost — including purchase price, insurance, maintenance and fuel — would total between one-fourth and one-third of that of the average traditional vehicle.
Larry Burns, GM's vice president of research and development, and strategic planning, said the project is part of Detroit-based GM's effort to remake itself as a purveyor of fuel-efficient vehicles. If Hummer took GM to the large-vehicle extreme, Burns said, the PUMA takes GM to the other.
Ideally, the vehicles would also be part of a communications network that through the use of transponder and GPS technology would allow them to drive themselves. The vehicles would automatically avoid obstacles such as pedestrians and other cars and therefore never crash, Burns said.
As a result, the PUMA vehicles would not need air bags or other traditional safety devices and include safety belts for "comfort purposes" only, he said.
Though the technology and its goals may seem like something out of science fiction, Burns said nothing new needs to be invented for it to become a reality.
"At this point, it's merely a business decision," he said.
Burns said that while putting that kind of communications infrastructure in place may still be a ways off for many American cities, the automaker is looking for a place, such as a college campus, where the vehicles could be put to use and grab a foothold in the market.
There's currently no timeline for production, Burns said.
The ambitious announcement also comes at a time when GM's future is hanging by a thread after receiving billions of dollars in federal aid and is in the midst of a vast restructuring that could still lead to a filing for bankruptcy protection.
Meanwhile, the ongoing recession has resulted in some of the lowest industrywide vehicle sales in more than a quarter century.
But Burns argued that some of the most revolutionary ideas have been born out of tough economic times.
"The next two months, and really 2009, is all about the reinvention of General Motors," he said.
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Stocks open lower, extend losses to second day
Wall Street extended its losses into a second day Tuesday as worries about banks' balance sheets and poor first-quarter earnings reports intensified.
The Dow Jones industrial average dropped more than 150 points while the broader indexes fell more than 1.5 percent.
Word that the International Monetary Fund was set to forecast $4 trillion in bad assets on banks' books added to concerns about the financial industry. Published by The Times of London, the report underscored investors' fears that the U.S. government's recent efforts to purge banks of troublesome loans might not work.
Meanwhile, investors are bracing for the coming flood of first-quarter earnings reports. Aluminum giant Alcoa Inc. will kick off earnings season Tuesday after the close of the market.
Investors have been more optimistic in recent weeks, sending the major indexes up more than 20 percent from 12-year lows in early March on increasingly positive news about the economy. But many analysts have warned that the rally might not be sustainable, especially as first-quarter earnings loom.
"I don't think anybody is making a bet on improvement yet," said Jon Biele, head of capital markets at Cowen & Co. "There is still a very much wait-and-see attitude that is weighing heavily on the market."
The reports, which will likely give investors some sense of where the economy is headed over the next several months, could easily upset the market if they are worse than expected, analysts say.
In early morning trading, the Dow Jones industrial average dropped 155.07, or 1.9 percent, to 7,820.78. The Standard & Poor's 500 index fell 17.15, or 2.1 percent, to 818.33, while the Nasdaq composite index fell 29.17, or 1.8 percent, to 1,577.54.
Financial stocks helped push the market to its first loss in five days on Monday, and are likely to remain a top focus for investors. Most analysts contend that an economic recovery is not possible until banks are restored to health.
The industry was jolted Monday after the Treasury Department delayed a program designed to help banks unload soured loans from their books and a prominent analyst said losses at banks are likely to exceed Depression-era levels.
Investors had been more upbeat about banks in recent weeks, buoyed by remarks from several bank CEOs last month that business was better than expected. But the latest news brought investors' worries about rising loan losses and bad assets to the forefront once again.
Alcoa, the first Dow component to post quarterly results, is expected to report a first-quarter loss on Tuesday, setting the tone for potentially more dismal results to come. Shares dropped 32 cents, or 4.1 percent, to $7.59 in early trading.
Analysts and investors don't anticipate the reports to be good, but are hoping that they at least meet or exceed already low expectations.
There is little by way of economic data expected Tuesday.
Bond prices rose, pushing the yield on the 10-year note to 2.90 percent from 2.93 percent late Monday.
In other trading, the Russell 2000 index of smaller companies fell 7.03 or 1.6 percent to 440.53.
Declining issues outnumbered advancers by about seven to one on the New York Stock Exchange where volume came to 129.3 million shares.
The dollar was mixed against other major currencies. Gold prices rose.
Light, sweet crude fell $1.35 to $49.70 a barrel on the New York Mercantile Exchange.
Overseas, Japan's Nikkei stock average fell 0.3 percent and Hong Kong's Hang Seng index fell 0.5 percent. In afternoon trading, Britain's FTSE 100 was down 1.8 percent, Germany's DAX index was down 1.4 percent, and France's CAC-40 was down 1.7 percent.
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Wall Street points to higher open
Wall Street headed for a higher open Monday as investors looked to extend its recent rally into a fifth week.
U.S. stock futures are moderately higher, following gains in overseas markets.
Investors have been more optimistic in recent weeks as economic data has shown some signs of improvement, and as governments around the globe make efforts to end the worldwide recession.
This week, investors will begin pouring over first-quarter earnings for more clues on where the economy is headed.
Ahead of the market's open, the Dow Jones industrial futures rose 31, or 0.4 percent, to 8,014, the Standard & Poor's 500 index futures gained 3.3, or 0.4 percent, to 843.90, and the Nasdaq 100 index futures rose 7.75, or 0.6 percent, to 1,324.
On Friday, the Dow rose 39 points to close above the 8,000 mark for the first time in nearly two months, logging a fourth straight week of gains and its best performance since 1933.
The Dow has climbed 22.5 percent since the average sank to a nearly 12-year low in early March. Even a bleak jobs report on Friday wasn't enough to derail Wall Street's newfound confidence.
But many analysts warn that worse-than-expected first-quarter earnings reports could rattle the market.
The dollar was mixed against other major currencies, while gold prices fell.
Overseas, Japan's Nikkei stock average rose 1.2 percent, while Hong Kong's Hang Seng index rose 3.1 percent. In late morning trading, Britain's FTSE 100 was up 0.8 percent, Germany's DAX index was up 1.0 percent, and France's CAC-40 was up 1.2 percent.
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Oil rises towards $53 as stock markets rally
Oil prices rose toward $53 per barrel on Monday, buoyed by expectations that rich nations' efforts to stimulate their economies may help end the global downturn sooner than expected.
Japan said it planned to spend at least $100 billion more to help its economy survive the global crisis, as investors seized on signs that markets may have bottomed to buy stocks and commodities.
In a sign appetite for risk is increasing, gold prices fell more than 2 percent on Monday, slipping toward a two-and-half-month low, and stock markets rose.
Japan's Nikkei stock average hit a three-month closing high and European shares rose, tracking a late rally in the United States on Friday.
U.S. light crude for May delivery was up 25 cents at $52.76 a barrel by 1100 GMT (7 a.m. EDT). London Brent crude rose 30 cents to $53.77 a barrel.
Analysts said agreement last week by G20 leaders on a $1.1 trillion deal to combat the global economic crisis had raised expectations that the downturn might not be as severe as anticipated, but this optimism could be short-lived.
"The pixie dust that President Obama and the G20 sprinkled on markets last week is still working its magic," said Christopher Bellew, oil broker at Bache Commodities in London.
"But I think that will blow away as people realize that there is no quick fix for this recession. I do not think the oil market will advance much further and I don't think the recent stock market strength will be sustained."
"SUSTAINED DEFICIT"
Goldman Sachs said in a note received by Reuters on Monday that crude oil price rallies would be short-lived until the second half of 2009 because of weak fundamentals.
It said recent oil price rallies had been fueled by optimism over future stabilization in the financial system and in global economic growth, but for the time being these rallies were unlikely to be sustained.
"We continue to expect that a more stable demand environment, reinforced by the likely need for the industry to restock during second-half 2009, will help push the oil market into a sustained deficit later in the year," it said.
Although crude oil prices have risen roughly 16 percent so far this year, they are almost 60 percent below their high of more than $147 a barrel last July.
Analysts said investors might attempt to push oil toward the $55 mark this week, should U.S. stocks rally further on signs that the economic slump is abating and if earnings season does not get off to a rocky start.
Oil rose nearly 11 percent last month and snapped two straight quarters of double-digit decline to rally 9.5 percent in the first quarter, thanks to a rally in global stock markets and OPEC's production cuts.
Crude oil speculators on the New York Mercantile Exchange decreased net long positions in the week to March 31, data from the U.S. Commodity Futures Trading Commission showed on Friday.
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Bad economy holds highway deaths to 1960s levels
Less money in the pockets of Americans means fewer highway deaths. As the economy slid deeper into recession and gas prices reached $4 a gallon last year, the number of people killed in auto accidents hit its lowest level in five decades.
In addition to fewer miles logged by drivers worried about expenses, experts also cited record-high seat-belt use, tighter enforcement of drunken driving laws and the work of advocacy groups that encourage safer driving habits.
Preliminary figures released by the government Monday show that 37,313 people died in motor vehicle traffic crashes last year. That's 9.1 percent lower than the year before, when 41,059 died, and the fewest since 1961, when there were 36,285 deaths.
A different measure, also offering good news, was the fatality rate, the number of deaths per 100 million vehicle miles traveled. It was 1.28 in 2008, the lowest on record. A year earlier it was 1.36.
"The silver lining in a bad economy is that people drive less, and so the number of deaths go down," said Adrian Lund, president of the Insurance Institute for Highway Safety. "Not only do they drive less but the kinds of driving they do tend to be less risky — there's less discretionary driving."
Fatalities fell by more than 14 percent in New England, and by 10 percent or more in many states along the Atlantic seaboard, parts of the Upper Midwest and the West Coast, according to the National Highway Traffic Safety Administration.
"Americans should really be pleased that everyone has stepped up here in order to make driving safer and that people are paying attention to that," Transportation Secretary Ray LaHood said.
In the past, tough economic times have brought similar declines in roadway deaths. Fatalities fell more than 16 percent from 1973 to 1974 as the nation dealt with the oil crisis and inflation. Highway deaths dropped nearly 11 percent from 1981 to 1982 as President Ronald Reagan battled a recession.
The government said vehicle miles traveled in 2008 fell by about 3.6 percent, to 2.92 trillion miles, indicating many people adjusted their driving habits as gas prices fluctuated and the economy tumbled. The number of miles driven by motorists had risen steadily over the past three decades.
The figures are preliminary; final numbers and state-by-state totals are expected later in the year.
Several states have pushed tougher seat belt laws that allow law enforcement officers to stop motorists whose sole offense was failing to buckle up. In 27 states and the District of Columbia, there are such enforcement laws. The remaining states have laws that allow tickets for seat belt violations only if motorists are stopped for other offenses. New Hampshire has no seat belt law for adults.
Seat belt use in 2008 climbed to 83 percent, a record. Fourteen states and the nation's capital had rates of 90 percent or better. Michigan had the highest seat belt use rate with 97.2 percent, followed by Hawaii with 97 percent and Washington state at 96.5 percent. Massachusetts had the lowest rate, 66.8 percent, while it was under 70 percent in New Hampshire and Wyoming.
Many states have tried to improve their enforcement of driving laws and public outreach. In South Dakota, for example, state troopers are required to devote several hours a year to give presentations discouraging drunken driving or promoting seat belt use.
"There isn't a civic group in the state that should have to worry about what's going to be on the next agenda for them if they want to have somebody come talk about traffic safety," said Jim Carpenter, South Dakota's highway safety director. Carpenter said an estimated 119 motorists died on South Dakota roads in 2008, compared with 146 in 2007 and 191 in 2006.
But many safety groups said it was unclear if the fatality numbers will continue to drop once the economy improves. If the projections hold, 2008 would be the first year since 1992 when traffic fatalities dipped below 40,000. Even with the declines, more than 100 people die on U.S. roads everyday.
"We still have too many people who are dying in car crashes," said Jacqueline Gillan, vice president for Advocates for Highway and Auto Safety.
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